Delayed tourism projects to pay fees, meet CSR requirements under new rules

The government has introduced new rules requiring developers of tourism properties that fail to complete projects within agreed construction periods to pay a USD 100,000 fee and meet additional conditions to obtain an extension.

The new regulation replaces rules that had been in force since 2022 governing extensions of development periods and deferment of rent and fines for islands, lagoons and land leased for tourism.

Under the previous rules, developers could obtain additional time either to complete an entire leased property or to develop it in phases.

The new regulation states that the Tourism Ministry may extend the construction period if the lessee submits a work plan showing that at least one phase will be completed and opened during the extended period.

Developers must also agree to pay the required amount as part of their corporate social responsibility obligations. This may be paid into the Tourism Activity Trust Fund maintained by the Finance Ministry or, where approved by the Tourism Ministry, spent on a development project identified by the government.

Under the revised rules, a developer seeking an extension must meet three conditions: agree to complete and begin operating at least one phase during the extended period, pay a USD 100,000 fee to the state, and fulfil the required corporate social responsibility contribution.

The USD 100,000 fee must be paid within 30 days of receiving conditional approval from the Tourism Ministry, including government holidays. If the payment is not made within that period, the conditional approval will lapse.

The ministry will then have the authority to take action under the lease agreement, including terminating the lease.

Extensions will only be available where physical development work has already begun within the grace period provided under the lease agreement. At the time of application, no more than three months may remain of the original grace period.

The regulation sets a maximum extension of 12 months for land-based projects and 24 months for lagoon developments. The minimum extension that may be granted is one month.

For projects developed in phases, the regulation requires at least one phase to be completed and opened within the construction period set under the lease.

After the first phase begins operations, developers may be given up to 12 months to complete each additional phase.

Where a project is divided into two phases, a USD 300,000 fee must be paid to the state for the extension. If a development has more than two phases, a fee of USD 400,000 will apply for each additional phase.

Those payments must also be made within 30 days of conditional approval.

The regulation also changes the rules covering rent and penalties for operating tourism properties that close for redevelopment.

A property may be closed for up to 18 months where only part of an island or land is being redeveloped. If the entire property is demolished and rebuilt, the closure period may extend to 24 months.

If the property does not reopen within the approved period, the lessee must be given 30 days’ notice to resume operations.

If it remains closed after that period, the ministry may grant a further six months to complete the work, subject to a USD 300,000 penalty.

Alternatively, a 12-month extension may be granted subject to a USD 600,000 penalty.

If the property still does not reopen after the additional period, the Tourism Ministry may terminate the lease without paying compensation.

The regulation also sets out procedures for extending construction periods where head lease rights change following a court judgment or where an undeveloped tourism property is subject to a settlement ordered by a court.

It further provides for exemptions where development is delayed by emergencies, disasters or other exceptional circumstances.